The similarities between a savings account and Demat Account are many. For instance, just like a savings account, a Demat Account can be used for transactions. The difference, however, lies in what is being transferred. Through a savings account, an investor can transfer his money and through a Demat Account, he can transfer his equities. There are many investors who link their savings account with the Demat Account. The reason why they do this is that linking the two accounts offer many benefits to the investors. Prior to understanding what these benefits are it is good to get some Demat Account information as well that on the savings account.
What Is Demat Account And Savings Account?
A Demat Account is an account for holding stocks, bonds, ETFs, mutual fund units of an investor in a dematerialized form. The key Demat Account information is the technology called dematerialization which it uses. Dematerialization is the process where the physical share certificates of an investor are converted into electronic form. A Demat Account can be opened with the help of a Depository Participant or DP. A DP will act as an agent to the investor connecting him with the depository where the investor’s Demat account is opened. For more information on Demat Account there are plenty of materials on the internet.
A savings account, on the other hand, is an interest providing deposit account where the investor’s money is kept safe. Though the interest provided in the savings account is relatively modest, its security and ease of execution make it a very popular option to save one’s money in. A savings account can be opened with any bank. Money can also be easily transferred from a savings account.
With the savings account and Demat Account information duly understood, an investor can now check out what are the benefits of linking the two accounts.
1. Transfer of Funds
By linking your Demat Account with a savings account, you can easily transfer money from your savings account to your Demat Account. If you have used a Demat Account before or accessed the Demat Account information, you will know that a Demat Account uses the money to buy or sell shares. By linking it with the savings account, the same can be done with much ease. Whatever your plans for the investment, you can directly transfer the requisite amount from the saving bank account to your Demat Account.
Money can be easily transferred by linking the Demat Account and savings account.
2. Ease of Facilitation
One of the great advantages of linking savings account and Demat Account is the smooth functioning which it provides. Buying shares will not involve many complications or take a long time to manually send or add money to the Demat Account. You can make this process effectively simple by linking your savings account with your Demat Account. In fact, the facilitating transactions will be much easier with the account being linked. Whenever you will buy shares the money can be directly debited from your savings account and whenever you have to sell shares the earned money can be directly added to your savings account. The savings account will work as a wallet of cash for your Demat Account.
3. Price Timing
A part of Demat Account information is that it helps you keep track of the performance of your investments as well as that of the share market. So, if an opportunity turns up where the shares of a company you want are being sold at a cheaper price, you should have the resources to buy them immediately. By linking the savings account with the Demat Account, you can immediately access your money to buy shares or any other forms of investment. Given how rapidly prices keep changing in the share market, it is important to seize the purchase or sell at the right moment.
4. Flexibility of Expenditure
No longer you have to allot fixed amounts for fixed expenses. With the Demat Account and savings account being linked, expenses can be effectively managed. If your financial position is not going positively well, you can easily transfer funds from the Demat Account to your savings account. Or if your finances are running quite well, and moreover, you got an additional bonus amount you can easily transfer it from your savings account to your Demat Account.
5. Applications Supported by Blocked Amount (ASBA)
ASBA refers to the process where the amount charged for the IPO application does not get debited from your savings account until the shares have been duly allotted and reflected in the latest Demat Account information section. This helps your savings account to generate interest on the sum which otherwise would already have been debited from the account. This then is another benefit of linking the Demat Account with your savings account.
So with the linking of these two accounts, you will be able to draw mostly benefits only. Furthermore, you can also link your trading account with these two and make it a perfect 3-1 account so as to make the whole process of investment one smooth move. The more you will be familiar with the savings account and Demat Account information, the more you would want to link the two to get the best of both.